Summary: President Bush approved the $11.8 billion sale of Lucent Technologies, the leading U.S. producer of telephone equipment, to Paris-based Alcatel following a rigorous 75-day security review. The merger, which will form the largest supplier of devices for mobile phone networks, is expected to overtake rival Ericsson, and will entail trimming 9,000 jobs and cutting $1.7 billion in costs in three years. Lucent's shares have declined 15% since the merger was announced in April, but rose a penny to $2.62 when the deal was approved, while Alcatel dropped 7 cents to 10.51 euros in Paris. The detailed review was designed to address concerns about Lucent's classified work for the U.S. government, and it was agreed that Lucent will have a separate company run by Americans to deal with sensitive U.S. contracts. However, Armed Services Committee Chairman Duncan Hunter expressed his "grave concerns" about the merger in April and commented that the recent meeting did not not give his committee sufficient details. The deal will be finalized on November 30.
Related links: Media coverage: Reuters . Commentary: Alcatel and Lucent Shares Rise Despite Weak Earnings • Ciena CFO: Alcatel-Lucent Merger "A Good Thing • Patricia Russo on Taking the Lucent-Alcatel Helm. Conference call transcripts: Alcatel / Lucent Technologies Inc. Merger Announcement Conference Call Transcript • Lucent Technologies 4Q2006• Alcatel 3Q2006
Potentially impacted stocks and ETFs: Lucent (LU), Alcatel (ALA) • Competitors : Ericsson (NASDAQ:ERIC), Cisco (NASDAQ:CSCO), Nortel (NT) • ETFs: Broadband HOLDRS (NYSE:BDH)
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